Chevron Plans Close to 1,000 Layoffs of Saudi Staff in Kuwait Oil Spat

By Summer Said and Benoit Faucon

DUBAI– Chevron Corp. is planning to lay off up to 1,000 employees working in the neutral zone between Saudi Arabia and Kuwait, as a dispute between those countries has halted all work on oil fields for several months, according to people familiar with the matter.

Chevron has already significantly reduced the number of petroleum-development rigs in the neutral zone, a 2,230-square-mile oil-rich area that the countries jointly oversee. One of the people said the layoffs of Saudi Arabian staff had begun.

“There is no point of keeping staff if the fields have been shut down for months,” the person said.

A Chevron spokeswoman said she couldn’t “discuss specific details of our employees and contractors.”

“Current difficulties in securing work permits and materials have impacted the company’s operations,” she said, forcing its local unit Saudi Arabian Chevron and Kuwait Gulf Oil Co. to stop onshore production in the neutral zone.

It wasn’t clear whether the layoffs are part of the 6,000 to 7,000 that Chevron had announced on Oct. 30, when it reported earnings that were sharply lower because of lower oil prices.

The layoffs come less than two weeks after Chevron’s chairman and chief executive, John Watson, expressed optimism that Kuwait would allow operations to continue while working out its dispute with Saudi Arabia. In an earnings call with analysts last month, he said he had been to the Middle East recently and discussed the issue with Kuwaiti officials.

“The Kuwaitis themselves are being hurt,” he said. “So I think there’s motivation for the Kuwaitis to begin issuing work permits and allowing work to continue while whatever disputes there are resolved.”

Chevron has run Saudi Arabia’s operations in the neutral zone since 2001, when it took over Texaco. It has faced difficulties there since the Saudis renewed its concession in 2009 for 30 more years without consulting Kuwait. Chevron’s offices are on land that Kuwait wants to use to build a refinery, and Kuwait officials said they didn’t realize that the Saudi renewal included that land.

The dispute escalated late last year, when Saudi Arabia halted operations at Khafji offshore deposits, which also lie in the shared neutral zone, over environmental concerns, without consulting Kuwait.

In response, Kuwait asked Chevron last year to move its offices out of Mina al-Zour and refused to renew visas for the company’s staff or to clear production equipment in May.

Since then, Saudi Arabian Chevron, which runs Saudi Arabia’s 50% share of the neutral zone’s onshore fields, started shutting down its units, removing about 250,000 barrels a day of potential supply from markets.

Mr. Watson said on Oct. 30 that Chevron had lost about 80,000 barrels a day of production since May, when Kuwait stopped issuing work permits for employees working in the neutral zone.

Saudi Arabia and Kuwait have formed a high-level joint committee to resolve the neutral-zone issues, but the negotiations have not led to any significant solution.

Restarting crude oil production from the neutral zone will require high-level political talks, Kuwait’s oil minister Ali al-Omair said last week.

Write to Summer Said at summer.said@wsj.com and Benoit Faucon at benoit.faucon@wsj.com

Breaking the story

Summer Said and Benoit Faucon were first with the news that Chevron Corp. has begun layoffs of workers in the Saudi-Kuwait neutral zone and plans to increase the number of layoffs to about 1,000 employees, as the dispute between the two countries has halted work on the oil fields for several months, according to sources. Chevron announced planned layoffs of 6,000 to 7,000 on Oct. 30 when it reported earnings, but it’s not clear whether these latest layoffs are part of that number.

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